Ukrainian market of sunflower seed - threats and prospects
The current situation on the domestic market of sun seeds in the 2012/13 season is rather interesting for a lot of market participants. About the future development of the situation, sun seeds market conjuncture of the first season we will try to estimate at this material.
At this stage on the market of the sun seeds there is difficult situation. The high demand of the current processing enterprises of Ukraine on sun seeds and the stable growth of the production capacities is the stimulus to increase sun seeds production. Thus in the current season sunflower planted areas totaled 5.13 mln ha. In comparison with the last year season there is an increase of 8% (4.7 mln ha).
Note in total sun seeds crop depends not only from the level of the agricultural production, but from the weather conditions in the period of growing and the harvesting campaign. In the period of harvesting campaign the crop forecasts were changed into the less side. The main reason of it was the weather factor impacted on yield rate. Thus according to our data the sun seeds average yield in 2012/13 MY totaled 17 c/ha as opposed to 20 c/ha in 2011/12 MY. Unfavorable weather conditions also impacted on the qualitative parameters of sun seeds. In particular there was large number of low-oil content seeds, which was at the level of 38-40%.
But despite all the pessimistic forecasts in 2012 Ukraine harvested rather good crop of sunflower, which according to the estimation of APK-Inform Agency totaled 8.6 mln tonnes (as opposed to 9.4 mln tonnes in 2011/12 season).
The major by-product of sun seeds is crude sunflower oil. The major volume of the stated commodities, produced by the Ukrainian oil producing enterprises is being exported so Ukraine is the leader among the largest-scale suppliers of sunflower oil on the world market. Thus sunflower oil prices on the world market and demand prices for the Ukrainian product on FOB/ CPT directly impact on the crude-material prices on the domestic market.
Thus in the beginning of 2012/13 season the major part of processors considering the pessimistic forecasts of the crop and actual volumes of sun seeds processing, actively included into the fight for the crude-material and its stock formation. Note the agiotage demand of the processing enterprises on oil seeds was warmed up by the position of the sun seeds owners as for sales perfectly understanding their leading position and tried to get own profit.
The notable feature of 2012/13 season was rather high prices for oil seeds in the beginning – 4000-4200 UAH/t CPT. In the first quarter of the current season there was prices increase with short periods of prices decrease or stabilization. The prices grew till the beginning of February, when they reached maximum level. Thus purchasing activity was realized at the prices level of 5000 UAH/t EXW and within 4900-5300 UAH/t CPT - enterprise. But in the second half of February on the market there was the prices lowering tendency caused by falling market of crude sunflower oil. Some enterprises stopped purchasing activity awaiting for the prices maximum decrease. Thus in the stated period the processing enterprises decreased to 4800-5000 UAH/t EXW.
The main stimulus to the sun seeds production volumes increase in Ukraine is the oilseeds processing volumes increase. Thus considering the putting into operation the new oil producing plants the total capacities for sunflower processing in 2012/13 MY exceed 10.4 mln tonnes. In the current year according to our estimation the country to process nearly 8.4 mln tonnes of sun seed, down 0.5 mln tonnes of 2011/12-season. In further considering the estimation of sunflower stocks our enterprises to process by 614 thsd tonnes sun seeds monthly, and in average in 7 months of the enterprises work to total 4.3 mln tonnes of oilseeds. Processing volumes decrease is due to the half loading of enterprises or the work absence due to difficulties with the raw-material or the end-commodities sales (sunflower oil, meal/ cake).
As for the exports of sunflower seed from Ukraine, the index mainly depends on the demand for Ukrainian oilseeds on the world market and the price levels. According to the February estimations of APK-Inform Agency, in the current season from September to January Ukraine exported 80 thsd tonnes of sunflower seed. But according to our forecasts, generally, in the current season Ukraine will supply 130 thsd tonnes of sunflower seed on foreign markets.
Taking into account all the above mentioned facts and indices, it is reasonable to assume the following results. First, according to the market participants, in the nearest future the price of sunflower seed will be subject to reduction, which will be driven by the need of agricultural producers to replenish the financing working assets in anticipation of the spring planting campaign. Besides, taking into account the price situation on the export market of sunflower oil and meal, the companies will have no choice but to lower prices for the raw material. Views of the market participants about the possible minimum level of prices significantly diverge. Nevertheless, most of the market operators suggests that the maximum purchasing price for sunflower seed will fall to 5000 UAH/t CPT. It should be noted that the fact will take place in the case of keeping of low prices and sales on the export market of the finished product.
If we talk about the medium-term prospect, we should note that while maintaining the stable growth of the production capacities (the forecasted processing capacity by 2014/15 MY will total nearly 15.1 mln tonnes), it is logical to assume that in the nearest future the Ukrainian fat-and-oil branch will reach the edge of raw material crisis (sunflower seed). The current season is the best proof of that. At the same time, participants of the Ukrainian market of sunflower seed and by-products are optimistic and believe that in order to avoid shortage of sunflower seed stocks for processing, the market should think not only about the "suppression of appetite", but also about investments in cultivation of sunflower seed.
Head of the oilseed department of APK-Inform Agency
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